California Insider

A Weblog by
Sacramento Bee Columnist Daniel Weintraub

May 31, 2006

And stand up straight, too

John Myers posts an interesting account of a Schwarzenegger appearance this morning at Sacramento State University. The gov had a little tough love for the students. After telling them they probably only needed six hours of sleep a night, he added this:

"I think it is very important for kids not to just wait for their parents to take care of them, or for the school to take care of them, or for government to take care of them."

Written in stone?

Another work comp rate cut

Insurance Commissioner John Garamendi is recommending another 16 percent cut in the "pure premium" rate for workers' comp coverage. This brings to 55 percent the cumulative reductions recommended by his office since 2003.

Bills bills bills

In their latest update, Assembly aides say the house has 228 bills to act upon by the Friday deadline for getting bills out of their house of origin. Today is the deadline for amending those bills on the floor.

Urban farmers

Three hundred poor community farmers. A developer with millions of dollars at stake. Eviction notices, bulldozers, race-tinged city politics. Hollywood celebrities. Threats of civil unrest. This fight brewing in South Central Los Angeles is showing all the signs of exploding into a big story. Keep your eye on it.

Minimum wage politics

The Legislature plans to take up a bill this week to raise the minimum wage by a dollar and index it to inflation. Gov. Schwarzenegger has already said he would veto such a bill. Apparently the Democrats are going to force him to follow through with that threat. At the same time, Schwarzenegger has said he would be happy to sign a bill raising the minimum wage without the cost of living clause. But Democrats don't want to give him that bill. So he is asking a state commission with authority over the minimum wage to do it without the cooperation of lawmakers. Democrats seem to think this is going to hurt Schwarzenegger in his campaign. And any veto of a minimum wage bill can certainly be used against him. But if the minimum actually rises by a buck, and its by his doing, that seems to get him off the hook politically.

May 29, 2006

Smart meters...

May 28, 2006

Going both ways

Twenty-five years ago, Joel Garreau wrote "The Nine Nations of North America," in which he described a nation he called "MexAmerica" -- a puzzle to both Washington and Mexico City -- encompassing much of the U.S. Southwest and Northern Mexico as well as Baja California. A quarter-century later, one is struck by how prescient Garreau was but also how modest his forecast was. MexAmerica now includes vast sections of Chicago and blocks along Main Street in Kansas, as well as the Baptist Church in North Carolina.

In the other direction, MexAmerica includes not just the Mexican border towns that have become drug supply centers for U.S. addiction but also Jalisco, Colima, Michoacan and points south.

Mexico, the poorer country, does not have the luxury of an appalled demeanor when the Atlanta couple transforms a beachfront property into a saltwater Tara or when senior citizens from Ohio park their retirement village in Baja.

May 27, 2006

LAT: Phil up three

An LA Times Poll to be published Sunday has Angelides up 37-34, within the poll's margin of error. In the Times' last poll, in April, Westly was up 33-20. You should be able to find the poll online here later. But for now, you can download it here.

May 26, 2006

Slippery claim

Speaking to supporters in Bakersfield today, Steve Westly ripped the oil companies and predicting Schwarzenegger won't do anything about alleged price gouging because the governor takes money from the industry.

"I don't take oil company contributions," Westly said flatly.

It's a fairly recent policy change.

In the past, Westly has taken money from BP, ChevronTexaco, Occidental, and others. As recently as January he accepted a contribution from Tidelands Oil Production Co. of Long Beach, according to records on file at the Secretary of State.

UPDATE: A Westly campaign adviser says the candidate has returned all oil industry contributions to his 2006 campaign committee, including the Tidelands Oil contribution mentioned below.

Republican beefs with Fox

Jon Fleischman gives a hearty pat on the back to legislative GOP-ers who skipped the Fox speech or wore "No Mas" buttons courtesy of Sen. Dave Cox. Fleischman said he stopped caring what Fox had to say after the Mexican president endorsed Bush's call for a path to citizenship for illegal immigrants in the United States.

I don't get the animosity toward Fox, or toward Mexico in general on the immigration issue. Sure, Mexico should clean up its act, reduce corruption, increase transparency and generally take steps to create a freer economy. But Fox is better on all those issues than anyone to hold his job in decades, even if he hasn't succeeded. Mexicans are coming here for one reason and one reason only: in search of a better life. Most of us in their shoes would do the same thing. I don't really think that's a problem, especially since they generally help our economy. But if there is a problem, isn't it with our own policies, either our border patrol or our policies granting services or benefits to illegals? The anger would be better directed at Congress than at immigrants or President Fox.

Finally, Sen. Tom McClintock says Fox breached diplomatic protocol by taking sides in a domestic US dispute over immigration policy. But are not all the Republicans calling on Fox to block to border from his side doing exactly the same thing?

UPDATE: Here is another example. Assemblyman Doug LaMalfa, who boycotted the speech, said Republicans had requested a meeting with Fox in hopes of having a "frank and constructive dialogue about how his policies and rhetoric are affecting this state, its business and its citizens lives." Yet LaMalfa also criticized what he called Fox's "offensive statements about our sovereign nation trying to get a handle" on illegal immigration. It seems that if Fox's statements about our policies violate sovereignty than our statements about his policies would as well.

May 25, 2006

Senate passes immigration bill

The world's 'best anti-poverty program'

Alexander Tabarrok says there is a reason that liberal and conservative economists tend to agree that immigration is generally a good thing. An excerpt:

Economists are probably also more open to immigration than the typical member of the public because of their ethics -- while economists may be known for assuming self-interested behavior wherever they look, economists in their work tend not to distinguish between us and them. We look instead for policies that at least in principle make everyone better off. Policies that make us better off at the price of making them even worse off are for politicians, not economists.

Immigration makes immigrants much better off. In the normal debate this fact is not considered to be of great importance -- who cares about them? But economists tend not to count some people as worth more than others, especially not if the difference is something so random as where a person was born.

Economists do sometimes distinguish between the rich and the poor, but high school dropouts in the United States are rich compared to low-skilled immigrants from Mexico. It's a peculiar kind of ethics that says we should greatly penalize very poor immigrants in order to marginally benefit relatively rich Americans (peculiar at least if one is not stuck in the Robbers Cave).

Immigration benefits not only the immigrants but also their families back home because of the billions of dollars of their own money that immigrants send to their families. Remittances to Mexico in 2004, for example, amounted to 16.6 billion dollars -- to put this in perspective that's about the same as all direct foreign investment in Mexico. Remittances far exceed foreign aid and remittances go directly to poor people and not to corrupt governments and dictators. Why ruin the world's best anti-poverty program?

May 24, 2006

A small house, these days

Parcel tax for schools

This initiative to increase to levy a parcel tax of $52 for small parcels and $104 for large parcels is apparently headed for the fall ballot. I don't get it. The measure would raise about $600 million a year. That's a fairly small amount in a schools budget that is now more than $50 billion in state and local tax dollars alone. It's about $100 per kid in K-12.

And the initiative splits that new money up into several categories so that the amounts going to each purpose are even smaller. Yet the debate that the measure will trigger over Proposition 13, and property taxes in general, is likely to be very bitter.

Why go to all that trouble for a relatively small amount of money? Is there something else going on here? The measure is backed by, among others, Silicon Valley millionaire and former state Board of Education president Reed Hastings.

El Gobernador

Gov. Schwarzenegger held a press conference this morning at which he discussed mostly immigration, and the impending visit of Mexico's President Fox. In their private meeting, the governor said, he intended to talk about immigration, trade and the environment. On immigration, he said he would tell Fox that while he does not support a military presence on the border, he will support the temporary use of the California National Guard in a back-up role to the Border Patrol. He also said he would ask Fox for more vigilent enforcement of tunnels under the border. Not much else of news there. He brushed off a question about conservatives asking him to confront Fox more forcefully on the immigration issue.

Not so proud

Not that he's ashamed or anything, but since Westly went negative he's stopped routinely notifying reporters about new ads and stopped posting the ads on his campaign web site. The latest is one we all knew was inevitable, the Phil-was-a-sleazy-developer ad. From what I have seen so far, it looks to be mostly if not entirely a collection of true charges. But they might have blended some of them together in ways that take a few liberties. Here is an account from the Bee's Capitol bureau. It will be interesting to see if this ad stops the momentum Angelides has clearly grabbed in the race. If not, Westly might not have much left to throw at him.

Buying them out

The Bay Area town of Hercules has come up with a novel way to stop Wal-Mart from building a store and shopping complex in a neighborhood city leaders envision for high-end shops serving a more desirable clientele. The city is going to use eminent domain to force Wal-Mart to sell its property.

May 23, 2006

How green is your Legislature?

The California League of Conservation Voters thinks there are currently 27 "reliable" votes for their environmental agenda in the Assembly and 20 in the Senate. By the League's count, given retirements and the shape of the party primaries, the next Assembly will be at least marginally greener with 28 pro-environment votes, and possibly as many as 38. The Senate, however, is moving in the other direction. The "best-case" scenario is for a drop to 18 reliable votes. Worst-case: 13 green votes. You can read Susan Smartt's full analysis here.

Dr. Cavala on the Dem primary

Bill Cavala, the longtime political strategist for the Assembly Democrats who's now doing his own thing with a private firm, has been blogging about the governor's race over at the California Progress Report. He seems to favor Angelides, or at least he assumes Angelides is going to win. In his latest post he also takes a shot at my colleague Dan Walters.

SurveyUSA on Schwarzenegger

The latest SurveyUSA tracking poll shows Schwarzenegger's approval rating hovering just where it's been for the past three months: at 36-61. That's among all adults. They don't list likely voters, but he's always done about five to ten points better among that smaller group.

Open borders

May 22, 2006

CTA tea leaves

Mike Antonucci knows more about teachers unions, and the CTA, than any other outside observer, and many on the inside. Go here for his speculation on what the CTA is likely to do with its political money this year and into the near future.

Moody's upgrades Cali's credit rating

Moody's Investors Service joins Standard & Poors in upgrading California's credit rating. But Moody's also includes a warning about the state's fiscal condition:

California's rating remains low compared to other states due to its ongoing fiscal challenges. The most immediate challenge is the state's stubborn structural budget gap. Although moderate in size on its face -- at less than 4% in the fiscal 2007 budget proposal -- the gap remains a concern for three reasons: (i) its persistence after several years of good economic performance; (ii) the state's still relatively narrow budget reserves; and (iii) the state's high degree of reliance on tax revenue from volatile sources such as corporate net income, capital gains, exercised stock options, and high-income taxpayers generally. Although the conditions do not appear to be in place for a sharp high-end income decline in the near-term, this represents a significant area of potential exposure for the state. Any significant revenue underperformance in the near term would directly lead to a swelling of the structural imbalance and cause difficult budgeting challenges.

Reciprocity

If Arnold Schwarzenegger had migrated to Mexico instead of the United States, he couldn’t be a governor. If Argentina native Sergio Villanueva, firefighter hero of the Sept. 11 attacks, had moved to Tecate instead of New York, he wouldn’t have been allowed on the force.

Even as Mexico presses the United States to grant unrestricted citizenship to millions of undocumented Mexican migrants, its officials at times calling U.S. policies “xenophobic,” Mexico places daunting limitations on anyone born outside its territory.

That's why I have been advocating a more open border, with more reciprocity. Any benefit or privilege we grant citizens of Mexico would be granted to citizens of the United States who go to Mexico. And the host country would be reimbursed for the net cost of public benefits provided to border crossers.

May 19, 2006

Like a Fox

Stephen Frank, a conservative activist who seems to have something of a following on the right wing, is ringing alarm bells about Schwarzenegger's planned meeting with Mexican President Vincente Fox next week. Frank would like the governor to tell the president to "use his military" to keep Mexican citizens from emigrating to the United States. I thought conservatives were supposed to be for small government. If Mr. Frank wanted to emigrate to another country, with or without the permission of that country's government, would he want the government of the United States to use force to stop him?

Unemployment up in April

May 18, 2006

Gov seeks minimum wage hike

The gov is trying to go around the Legislature again to make policy -- this time to raise the minimum wage. He has said since last year that he favors a $1 increase in the minimum wage, which today is $6.75 per hour. But the Democrats in the Legislature won't send him a bill to do that. Instead, they want to raise the wage and index it to inflation so that it increases automatically every year. Schwarzenegger won't go there. So he is asking the Industrial Welfare Commission to raise the minimum with an administrative action. His office thinks this can be done within about four months, after public hearings.

Shot to the heart

It's 1999 all over again

The Assembly Rev and Tax committee on Monday passed AB 2218, which would exempt the purchase of manufacturing equipment from the state sales tax. The Board of Equalization estimates the revenue loss at more than $600 million a year. The last manufacturers' tax credit in California lapsed and was not renewed because of a lack of evidence that it helped create jobs.

May 17, 2006

Westly fundraiser

A Steve Westly campaign fundraiser that had been scheduled for the lunch hour on Wednesday in Sacramento was abruptly cancelled Tuesday night amid questions about a solicitation sent out by an ally of the controller who was helping him raise money.

The $2,500-per-person event was targeted to information technology professionals in town for a big annual conference. Jeff Wallack, the event's sponsor, noted in an email invitation that Westly's department was "completing their procurement of the 21st Century Project," referring to a big IT contract the controller is administering for the state's new computerized payroll system. The not-so-subtle implication was that by attending the fundraiser, IT folks might get in on some of the work. Although a primary contractor has already been selected, there is some question about whether that bid will hold up, and even if it does, there's still a ton of subcontracting to be done.

The email, by the way, also described Westly as "a founder of EBAY." Westly was an early employee (#23) of eBay, not a founder.

The lobbying community thinks the event was cancelled because the Wallack email looked bad. But with Westly writing checks to the campaign at a pace of $5 million per week or so, maybe they've just decided they don't need to raise money anymore.

The lieutenant governor works?

Lt. Gov. Cruz Bustamante is scheduled to join three legislators to ride their bikes to the Capitol on Thursday to promote Bike to Work Day and physical fitness in general. Bustamante, who's been losing weight on a fitness regimen of late, and Sen. Deborah Ortiz will bike from Elk Grove. They will meet up there with Sen. Tom Torlakson and Assemblyman Lloyd Levine, who plan to leave Torlakson's Antioch home at 3:30 a.m. to make the 75-mile trek to the Capitol. The lite-gov and the lawmakers will be available to do live interviews via cell phone as they pedal away. Times sure have changed since the days when lawmakers huffing and puffing at 3:30 a.m. not only were not riding bikes but were in no position to be doing media interviews.

Border fencing

According to this story from the New York Times, only 15 Democrats (and one independent) voted against the Sessions amendment to the immigration bill that would require the construction of hundreds of miles of new fencing along the border. Neither Boxer nor Feinstein were listed among the "no" votes. I'm not a big fan of the idea, but when some people try to make the fence into a partisan issue, remember that there were 83 votes for the amendment on the floor of the U.S. Senate. Let's hope it turns out to be what some have called a very strong fence with a "very big gate."

It's their economy, stupid

Bond rating to A+

Standard & Poor's has just upgraded the state's bond rating from A to A+. Still, the rating agency offers this cautionary note:

There are reasons to believe the current surge in revenues could be of a
onetime nature, which is a concern. In April the state received $11 billion in
personal income taxes, a high proportion of which was from taxpayers filing
for extensions, who tend to be progressively taxed upper-income filers with
more volatile income. In addition, capital gains tax revenues increased by 32%
in fiscal 2005 with recent double-digit housing price increases and strong
stock market gains being likely contributors to this increased capital gains
tax income.
Gov. Schwarzenegger's proposal to spend down much of the state's fund
balance in fiscal 2007 also constrains the rating, as does the substantial
amount of deficit financing bonds remaining, which is almost equal to the
estimated fiscal 2006 general fund balance. However, the governor is also
proposing the use of about $3.8 billion of the state's estimated $101.0
billion of fiscal 2007 general fund expenditures for onetime purposes. In
addition, he announced a plan to retire all deficit bonds by fiscal year-end
2009, including the repayment of roughly $1.5 billion in fiscal 2007.

Perata: father of the public works deal?

Senate leader Don Perata was an early advocate for the kind of big infrastructure bond that eventually became Gov. Arnold Schwarzenegger's top legislative priority for 2006. Below, from Perata's office, is a comparison of his bond proposal, SB 1024, and the eventual agreement reached by the Legislature and the governor. Perata clearly got everything he was seeking, and then some.

Flood Protection

SB 1024: $1.2 billion for levee strengthening
Water bond, AB 140, includes no less than $2.5 billion for levee improvements

Núñez on budget, immigration, gas

Assembly Speaker Fabian Núñez met with reporters this morning and said he did not think he and the governor were very far apart on the budget. But he did list several significant differences.

He said he opposes prepaying debt service on the fiscal recovery bonds, preferring instead to put that $1 billion into the reserve, where it could be spent in an emergency or saved to help bridge the structural deficit next year.

He said Assembly Democrats will also oppose the governor's proposal to put extra revenue from the sales tax on gas into the general fund and then earmark the money to pay back the transportation bonds that are part of the big infrastructure package. He said Democrats want that money to go to local public transit, per a longstanding deal with the locals.

He made a point of saying the Democrats want to make sure they spend one-time money on one-time needs, but then he raised questions about one of the governor’s proposals to do just that. He said he was skeptical of the $400 million Schwarzenegger wants to dedicate to equipment and supplies in case of an outbreak of bird flu. And he said Democrats were more likely to want to spend that money on poor people whose services or grants were cut in bad times. He brought up the question of revisiting last summer’s deal, originally proposed by the Democrats, to freeze welfare grants this year to help balance the budget.

On other topics, Núñez called President Bush’s expected announcement that he will send the National Guard to the border an “irresponsible gesture” that will inflame tensions with Mexico. But he also struggled to try out a message that Democrats seem to think would resonate with voters, saying he wanted to bring California’s National Guard home from Iraq so they would be available here in case of a disaster. The obvious hole in that argument is that if they were on the border, they would be here, and could be transferred quickly to help with a disaster if one arose. Twice while ripping Bush on the immigration issue Núñez referred to Bush as "the governor" rather than president. He then apologized and noted how well he and Schwarzenegger have been getting along.

Finally, Núñez talked about gas prices, and said he opposed suspending the sales tax on gas but might favor a windfall profits tax if the money raised were directed back into cutting the price at the pump. But he also complained about our dependence on oil, even though a higher price is almost certain to make us less, not more dependent. And he laughed off as a joke my very serious question about the matter, which was, If $3.27 a gallon is too much for gas, what would the correct price be? I think every politician who is pandering on gas prices should be asked this question, mostly because they cannot answer it. They all know that it is impossible for politicians or bureaucrats to set the “right price” of a commodity that is traded on world markets. Nunez basically said he’d know the right price when he saw it and noted that if gas were still at $2.30 a gallon, we might not be hearing so many complaints about it.

Westly stars in Angelides ad

Here is the first negative ad from the Angelides campaign, which, oddly enough, focuses on Steve Westly going negative. It's a series of video clips of Westly telling audiences that he won't be the first to go negative, superimposed over a headline saying that Westly was, in fact, the first to go negative. There is no other text and no voiceover.

I am not sure if voters really care who went first, or if they even care about negative ads, though they always tell pollsters they don't like them. But I do think this ad has a chance to raise doubts about Westly's credibility among voters who don't know him well but were favorably impressed by his early campaign.

Prop. 82 ads

The No on 82 campaign says it will begin airing this ad on Tuesday. The ad features people portraying a school principal, teacher, student and parent with the message that the proposition would create a $2.4 billion preschool bureaucracy" and still leave parents subject to a "parent tax" if the money falls short. More accurate would be to say that the measure creates a $2.4 billion program run by a preschool bureaucracy. But pay attention to that line about the "parent tax," which refers to the provision in the proposition that allows the state to levy fees on families if the tax on the wealthy falls short of funding the program. That looks like one of those provisions in a ballot measure that can prove fatal, like the death and disability component of the governor's proposed pension reform last year.

LAO on the budget

Here is the LAO's quick analysis of the governor's revised budget proposal. The analyst is pretty positive about the governor's overall direction but raises questions about the level of education spending and suggests prepaying a different kind of debt to relieve pressure on the 2007-08 budget rather than having that benefit come later. Also, the LAO thinks the revenue projections might be low but agrees that it is "prudent" to err on the side of caution.

Fall ballot

The California Nurses Assn. says it plans to turn in signatures this week to qualify an initiative that proposes public financing for state political campaigns. The measure, if it qualifies, would be on the November ballot. So, in addition to the public works plan crafted by the governor and the Legislature, it sounds like we can look forward to at least the following measures on the fall ballot:

The revenue projection assumes that about $1 billion will be automatically skimmed off the top and added to the reserve, per Prop. 58, the ballot measure approved by voters in 2004. If you don't do that, revenues would be $98.8 billion and the problem reduced to $4.4 billion.

Also, projections suggest that the current year will end with a $2.2 billion reserve, so that money could be used to close the shortfall in the following year.

Still, they're facing a structural deficit in the neighborhood of $5 billion that is projected to grow even larger the year after that before shrinking again. Nowhere near out of the woods.

Exit exam

A judge has blocked implementation of the high school exit exam for the class of 2006, which is set to graduate next month. This ruling is bad law, and it's bad for the very people it is supposedly intended to help.

One of the more bizarre consequencs of the ruling is that high school seniors who had failed the exam and were preparing to take remedial classes this summer will now be relieved of that requirement. Again: kids who do not possess even the minimal math or language skills the exam required will now get diplomas anyway, and most of them will probably skip the very classes that were designed to bring them up to speed, and which they were prepared to take. Wonderful.

The judge in this case is saying the state Legislature cannot decide what it should take to to graduate from high school in California. But by the same token, every teacher who gives a kid an "F" in a required course is also denying that kid a chance to get a diploma. Will the next lawsuit challenge the right of teachers to fail their students if they do not meet the requirements of the course?

May revise

Turns out the governor is projecting $7.5 billion in new revenue over two years. That's $4.8 billion in the current year, which ends June 30, and $2.7 billion next year. How would he spend it?

Roughly, like this:

Schools: $2.8 billion (required by Prop 98)

New spending mandated by courts or contracts: $500 million

Rainy day fund: $1 billion

Pre-paying deficit bond debt: $1 billion

Pre-paying other debt: $600 million

Fixing levees: $500 million

Emergency preparedness: $400 million

Public safety: $100 million.

Early reaction in the Legislature seems pretty favorable. Assembly Budget Committee chairman John Laird said his party's main demands will be to move more aggressively to get health insurance to every child in California and to roll back recent increases in community college fees. Senate Leader Don Perata pointed to child care for welfare recipients who go to work, and foster care as top priorities for more money.

Republicans generally seem happy that the proposal dedicates so much of the new revenue to one-time obligations like paying down debt, and that most of the money that does go for ongoing commitments is going to the schools, which are a popular program and must get the money anyway because of Proposition 98.

Jerry Lewis, Brent Wilkes

May revise preview

With the governor scheduled to release the full version of his revised budget at 1 p.m., here is a list of what we already know, or think we know, about the plan:

--At least $6 billion in new revenue over two years, with $4 billion or more of that coming in the current year and $2 billion in the upwardly revised revenue estimate for the fiscal year that begins July 1. The belief that much of the recent windfall represents a one-time surge in tax receipts will have the effect of making next year's revenue number barely larger than this year's.

--$2.8 billion more for the schools in the short term, including $800 million in the new fiscal year. That's the amount that can be considered "ongoing funding" above and beyond what Schwarzenegger proposed in January.

--A commitment for another $2.9 billion over eight years, beginning the year after next, to settle a bitter, year-long budget dispute with the teachers union and other members of the education lobby. This is a big political story and will add to the state's structural deficit but has no direct impact on the numbers in the budget proposal being discussed today.

--$500 million for flood control repairs, per the "pay as you go" provision in the recently passed infrastructure plan.

--$400 million for disaster-preparedness, including about $50 million to buy face masks for medical workers, $100 million to buy ventilators, and $164 million for other medical supplies in the event of an outbreak of avian flu. Note that these are all one-time expenditures (hopefully).

--$23 million to help counties expand health insurance coverage for about 24,000 poor children.

--$43 million to pay for cost of living increases in grants to the aged, blind and disabled. Schwarzenegger in January had proposed suspending these COLAs. This would raise the monthly grants from $836 to $849 for singles and from $1,472 to $1,491 for couples.

--An additional $1.6 billion to pay off budget debt early, reducing the state's future obligations. This brings to more than $3 billion the total amount in the budget proposal dedicated to debt repayment.

--An additional $1.6 billion to the rainy day reserve, bringing the budgeted reserve to more than $2 billion. The administration has been spinning this as the largest reserve since 1978, but that's in nominal dollars. As a share of the general fund, it is still barely 2 percent.

So far, I count less than $1 billion in ongoing spending added to the 2006-07 budget, plus the commitment to pay down the disputed education money beginning the year after that. But we still have not heard how much Schwarzenegger will propose increasing the prison budget, which will be in the hundreds of millions of dollars, nor have we heard whether he will set aside money for pay raises for state employees whose contracts have expired. Those two items alone could represent well over $500 million.

One thing to watch will be whether his new spending number for 2006-07 increases by more or less than his new revenue number. If it's less, than he can at least claim to be whittling away at the structural deficit. If it's more, we'll have to look at how much of the increased spending is on one-time items like infrastructure and debt repayment. Once you subtract those out, we'll be able to see how much progress, if any, he is making toward bringing the budget back into balance over the long term.

We$tly's money

The Angelides campaign is trying to make an issue of Steve Westly's latest contribution to his own campaign, another $5 million check. The question is whether voters would rather have a candidate who is "buying an election" with his own money, or one who is trying to buy it with other people's money. I suspect Westly is insulated from attack to some degree because 1) his money comes from eBay, a popular company, and 2)he is already a government official, rather than a political neophyte running for his first office.

May 11, 2006

Why the speaker didn't speak

That's the explanation given by Fabian Núñez's office for why he left UC Berkeley Wednesday without delivering a commencement address to thousands of students and guests who were gathered to receive their diplomas and hear him speak. The school's chancellor jumped in at the last minute to replace him.

According to the AP story, the event was picketed by about 20 janitors on behalf of the American Federation of State, County and Municipal Employees.

UPDATE: The speaker's office sent along a copy of a letter from the law school dean to graduating students explaining why Howard Dean is backing out of addressing them, for the same reason as Núñez. The note further explains that Núñez engaged in negotiations with the union to try to resolve the issue, to no avail. An excerpt:

He and his staff spent several days trying to seek an accommodation, with no success. Yesterday, Speaker Nuñez offered his commitment that the Legislature would appropriate additional funds specifically to raise the wages of the lowest-paid U.C. employees -- not just the custodians, but all workers -- and Chancellor Birgeneau won authorization from U.C. President Dynes to accept the Nuñez offer on behalf of the entire U.C. system. In return, Nuñez asked that he be allowed to address graduating Berkeley students. Leadership of the AFSCME union local rejected the offer.

Next year's revenue

A document on debt repayment circulated this week by the administration shows an estimate of general fund revenues for 2006-07 of $94.3 billion. Revenues in the January budget proposal were estimated at about $92 billion. The Department of Finance won't connect those dots for us, but it sure looks like an increase of about $2.3 billion for the fiscal year that begins July 1. That would be on top of the $4 billion or so already collected this year that exceeded the earlier projections.

Poverty in California

The PPIC has published an excellent analysis of poverty in California, comparing it to the rest of the nation and looking at what happens if you adjust poverty rates to reflect differences in housing costs (California's goes up and the rest of the nation goes down). The report also looks at the demographic drivers of poverty and the trends over time. You can find it here.

Debate post-mortem

I didn't see anything new in the Democratic debate. I have never been much of a fan of the genre, to tell you the truth. They are performances, and usually not very good ones, and they rarely tell us anything we don't already know about where the candidates stand on the issues. Or how they would govern. What they do tell us about the candidates' communications skills can be important in the sense that you usually cannot govern well if you can't communicate. But even there, debates are not foolproof. The skills it takes to govern inside the Capitol are very different from the skills politicians use to communicate in a campaign, and as Schwarzenegger has shown, the two are not interchangeable.

Anyway, both candidates are still talking a lot about "fully funding" the schools without saying how that would differ from what Schwarzenegger is proposing. Especially Westly. Angelides is on the record saying he would give the schools more in ongoing funding than even the CTA is asking for. But Westly has said he would fund the existing Prop. 98 guarantee and then work out a plan to restore, over time, about $3 billion that the education lobby has said the state owed the schools. Now Schwarzenegger has done that, effectively taking the issue off the table if Westly is the nominee. And if Angelides is the nominee, he will presumably stick to his argument that we should raise taxes on the wealthy and business and give more money to the schools.

But as my last blog item showed, Schwarzenegger's revised budget would give the schools $8 billion more in state and local funds over two years, an increase of 17 percent. Beyond that, he's worked out a deal to pay all of the money the ed lobby says is owed, over seven years. It's going to be hard for Angelides to argue for more than that. I predict that if he is the nominee, Angelides will redefine "fully fund" upward, to something like "at least the national average." There is probably some appeal in that. But if Schwarzenegger can get his $8 billion increase to be the new go-to number for education, rather than the $2 billion (later raised to $3 billion) he was accused of stealing from the children, it will be difficult for Angelides to score many more points on that issue.

School spending

If the Legislature approves the Schwarzenegger/CTA agreement on education spending, the Prop. 98 numbers will look like this for last year, this year and next year:

2004-05: $47 billion
2005-06: $52 billion
2006-07: $55.1 billlion

That's a huge increase over two years (17 percent) no matter how you count it. But next year's increase will actually be far larger than it appears in these numbers. That's because the $52 billion credited to the current year is actually $50 billion that was already budgeted, plus $2 billion that will go on the books for this year but won't actually arrive until after the next budget is signed. For all practical purposes, then, that's money that will be spent next year. If you adjusted the numbers to reflect that fact, they would look more like this:

May 10, 2006

Prop. 98 deal

The Schwarzenegger Administration has reached a deal with the education lobby to settle a dispute over how much money the state is obligated to spend on the schools, administration officials say. The agreement will reportedly settle the lawsuit filed by the CTA against Schwarzenegger and the state.

The deal is complicated, but in essence it requires the state to pay an additional $2.9 billion over seven years, beginning in the 2007-08 budget year. The first payment will be $300 million, followed by payments of $450 million a year until the entire obligation is erased. Although technically the $2.9 billion is considered a "one-time" obligation, by paying it over seven years the smaller annual amounts effectively would be built into the budget for most of the next decade.

The state would also increase this year’s schools budget by $2 billion, from $50 billion to $52 billion, and increase next year’s budget by about $800 million above the amount Schwarzenegger proposed in January, to a record $55.1 billion. These increases are required by Prop. 98.

So the bottom line is that the schools get an additional $2.8 billion up front, and an extra $2.9 billion spread over the next seven years. Not bad. Remember, the governor's January budget already had a $4.3 billion increase for the schools. All of this is on top of that money.

Desmond gets new appointment

Joe Desmond, the Schwarzenegger adviser bounced as chairman of the Energy Commission when the state Senate refused to confirm him, has landed as undersecretary of the Resources Agency for energy issues. So he will continue to be a key adviser to the governor on this issue. And his new appointment does not require Senate confirmation.

May revise hints

It's sounding more and more like the gov intends to use the tax windfall to pay down debt and boost spending on schools, with most of the education money coming in a one-time payment that does not add to future obligations. If so, that's a case where good policy would be good politics.

May 9, 2006

Núñez on the bond campaign

Assembly Speaker Fabian Núñez made some interesting comments about campaigning for the infrastructure bonds in an interview with Capitol Television News Service and KGO-TV this morning. This is from a transcript released by his office:

“Well, the campaign on the gubernatorial side has not materialized yet. I think that at some point in the Fall you are going to see Democrats campaigning for Democrats and Republicans campaigning for Republicans. I think we are mature enough to know that we have to distinguish between when we are campaigning for something for the good of all of California like the infrastructure bond package -- which in my opinion is a historic set of valid measures that the voters will have an opportunity to vote for – and a distinction between that and what it means to run a gubernatorial race.

“I want a governor to be governor of this state that believes in the principles of California; that wants to raise the minimum wage; that wants healthcare insurance to be afforded to the 6.5 million people who don’t have it and those that have to pay such high premiums just to have healthcare insurance. I want a governor who cares about our environment. From my view at this point I think that is Phil Angelides.

“But whoever wins that Democratic primary is who I am going to campaign with in November. And I think that some people find it difficult to say ‘well how can you work with the Governor and then work against the Governor?’ It’s very simple: I’m going to work with the Governor and any one else that helps to get these measures passed and then I’m going to support the Democratic candidate who wins the nomination.”

Highway 99

The governor continues his infrastructure tour today with stops in Chico and Bakersfield to tout the $1 billion the plan would set aside for repairs and expansion to Highway 99. For all the Republican carping about too much of the transportation money being spent on transit, this is a project that would modernize a crucial highway that runs down the spine of the state, and through the GOP heartland. It's also the part of the state forecast to absorb the fastest growth in the years ahead.

May 8, 2006

Exit exam in peril

Strike threat?

State workers are threatening to strike if they don't get a contract to their liking. What would be the political impact in this election year? I think it would depend on two factors: what are their demands, and what tone does the governor use in response?

If the unions demand something relatively modest, the cost of living or a percent or two beyond that, they might attract a decent level of public support. And if Schwarzenegger over-reacts and takes a confrontational stance, that would help the unions.

But if the unions overreach, which they are inclined to do, and the governor stays calm, which is not necessarily in character for him, the public could swing the other way. An in-your-face strike featuring angry public employees picketing offices serving the poor, for example, (not to mention the DMV), would probably help the governor. People want to be fair to those who serve the public. But I don't sense any great willingness to empty the treasury giving big raises to public employees, even if they have not had one in several years. Neither have private sector workers.

KPIX: Angelides up by 10

Arnold and the boys

I wouldn't go as far as Dan Schnur, who says that the infrastructure bonds deal has sealed Schwarzenegger's re-election later this year. But the four-city fly-around today with the Democratic and Republican leaders of the Legislature to tout the virtues of the plan surely won't hurt. It should get a ton of local media attention and most of it will be focused on a bipartisan accomplishment that will result in the construction of more schools, university buildings, roads and rail lines, and the shoring up of levees that threaten a Katrina-style disaster. I wonder if the gov's campaign team will be along to film these events for commercials later in the year. The tour begins in Oakland and stops in Burbank, Santa Ana and San Diego.

May 5, 2006

Angelides gets nod from league

The California League of Conservation Voters, which earlier this week hosted the first-ever governor's debate focused entirely on the environment, has just given its endorsement to Angelides over Westly in the Democratic primary.

Kings hire Steinberg

The Maloof brothers, whose NBA Sacramento Kings might be playing their last game of the season tonight, have hired former Assemblyman Darrell Steinberg to represent them in negotiations with city and county officials over a new arena for the team. Steinberg, who is the favorite to win the state Senate seat being vacated by Deborah Ortiz, has a reputation as a pretty decent mediator on thorny issues. He's got one here.

Westly, Angelides back bond plan

Steve Westly and Phil Angelides have both reacted positively, if coyly, to the bond deal approved early this morning in the Legislature. Both Democratic candidates praise the Legislature for its action while, not surprisingly, mostly ignoring the governor.

Westly:

“I applaud the Democratic leadership for reaching across party lines to ensure that California can begin rebuilding its crumbling infrastructure. We must move past the partisanship that has paralyzed this State and work together to tackle the tough issues facing California.

“This $37.3 billion investment is vital to California’s future. We must protect those funds from waste, fraud and abuse. I am calling upon the Governor and the Legislature to put tough fiscal controls in place to ensure this bond is a boon – not a boondoggle – for California."

Angelides:

"The agreement by legislative leaders on a $37 billion infrastructure bond package is a victory for our State and for future generations of Californians. This is a realistic infrastructure investment package that - when combined with a responsible and truly balanced budget that fully funds our schools - will help build California’s future.

“I’ve been a forceful and consistent advocate for using bonds to invest in an environmentally sustainable future. I’m pleased that this new plan draws from those values, adding a housing and transit component to promote smart growth, providing funds to secure our levees and enhance our educational resources.

“I applaud Senate President pro Tempore Don Perata and Assembly Speaker Fabian Núñez for fighting for an infrastructure plan that will put California on the high road to a sustainable future and a strong economy.”

May 4, 2006

No energy

Bond deal getting closer

The latest on a possible bond deal. Thirty-five billion dollars, with $19.2 billion for transportation, $10.4 billion for schools and universities, $3.1 billion for flood control and $2.6 billion for housing. But it's still not fully baked.

Electricity forecast

This would be good news, if it turns out to be true: the manager of the state's power grid says California should have enough juice to get through this summer without any shortages of elecricity. But demand is growing faster than supply.

Do as I say...

While Phil Angelides has crusaded as an environmentalist, he has also taken more than $140,000 in campaign money from a developer that "bulldozed the Dana Point Headlands to build 118 oceanfront homes," according to this story in the LA Times. And while the treasurer has gone after what he sees as abuses in corporate boardrooms, he has handed out state bond business to firms that hired his friends and associates. The story is headlined "a study in contrasts," but that seems a bit mild.

UPDATE. A friendly reader notes that, in fairness, I should have mentioned that the Times story linked to above reports that Steve Westly also received big donations from the same contributor, and that Westly also has steered pension fund business to donors, as this LAT story detailed.

May 3, 2006

Flood control money

I have to admit that I think Oklahoma Sen. Tom Coburn had a point when he tried to remove $11 million from a special appropriation for emergency repairs to California's levee system. Sen. Feinstein held up a photo of Sacramento's Pocket neighborhood and said that without the federal money, 100,000 homes could be under water if one of the weakened levees gives way. Coburn's question: if the emergency is so dire, why doesn't California pay to do the fixes?

Coburn, under pressure from Feinstein, Sen. Boxer and Gov. Schwarzenegger, abandoned his amendment today, clearing the way for the $37 million measure to go forward. But it's still strange that there is so much screaming and yelling about a few million federal dollars when California just collected $3 billion more in personal income tax than expected in April, and the state plans to put a multibillion-dollar flood control bond on the ballot in November.

It's one thing for the nation to rally as one and come to the rescue of folks who have been hit with an unanticipated disaster. But why should the people of Nebraska and South Carolina and Oklahoma pay for projects that protect people living in the richest state in the country who decide to build or buy houses in a flood plain? I'm happy to take the money if they are willing to give it. But this is something we really ought to be doing for ourselves.

Tobacco tax supporters say they have sigs to qualify

Backers of a proposed initiative to increase the tobacco tax by $2.60 per pack say they intend to file more than 1 million signatures for the measure with county registrars this week. If verified, the petitions would qualify the proposal for the November ballot. It would raise an estimated $2 billion annually for anti-smoking programs plus disease prevention, medical research, children's health insurance, and emergency room care.

Public works bond

The four legislative leaders just finished another meeting on the infrastructure package, in the speaker's office. A spokesman for the speaker says they intend to reconvene this afternoon in hopes of nailing down a deal. Both houses have scheduled sessions for Thursday, where a deal, if one emerges, would be put to a vote.

New Angelides ad

Phil Angelides has a new ad out and, news flash, it does not feature his daughters. Instead it shows a nurse, a teacher, police officer and environmentalists briefly explaining why they support Angelides for governor. A definite improvement. But I'm still looking for the hard-hitting ad that matches his rhetoric on the stump in its appeal to Democratic voters.

Off the hook

The Democratic Party raised nearly $2 million at a Pebble Beach fundraiser hosted by AT&T, the firm pushing legislation to open up the cable television industry to more competition from telephone companies. AP has the story.

May 2, 2006

LAO: Yacht tax nets $45 million a year

In this report, the LAO says recent changes to the state's so-called "yacht tax" are bringing in $45 million a year. Under the old law, Californians who bought vessels, vehicles and aircraft in other states and left their purchases out of state for 90 days were exempt from the state's use tax. The new law exempts only those purchases kept out of state for a full year. Gov. Schwarzenegger has proposed extending the current law, which was enacted on a temporary basis, for another year. The LAO says it would be better to make it permanent to end uncertainty over what the tax rates will be.

UC Pay audit

May 1, 2006

A protest inside, too

One of the few public events in the Capitol today was the Senate budget subcommittee that handles education issues. The committee, like its counterpart in the Assembly, voted to eliminate funding for staff and support of the state Board of Education. The action came in response to the board's recent vote on the language curriculum guidelines, and its refusal to allow more flexibility in the teaching of reading and writing to English learners. Few expect this retaliation to stick. The money will eventually be restored. It is just the Democrats' way of sending a message that they don't like the board's current guidelines for teaching language arts to kids who are not yet fluent in English.

NOTE: I tweaked this item after posting to delete earlier references to teaching in languages other than English. Supporters of the legislative Democrats' position on this issue insist that they are only seeking more flexibility from the state's standard reading program, not the ability to use native language in that instruction.

Sacramento immigration rally

May 1 immigration rally at Capitol Park, Sacramento.

I just got back from the May-Day immigration rally at the California Capitol. In an interesting journey through time and space, a colleague and I ate lunch at a city park named for John C. Fremont, the U.S. Army captain who triggered the Bear Flag revolt that led to the taking of California from Mexico about 160 years ago. The park was quiet, nearly empty, but as we ate, we could see demonstrators streaming toward the Capitol a few blocks away. The protest itself was large by Capitol standards, I am guessing 10,000 people, maybe more. It filled the plaza outside the western entrance and flowed down the mall toward the Sacramento River. It was festive and loud, but from where we stood about 100 feet from the podium, we could hardly hear the speeches. Not sure if there was more sound further back, but the speakers were completely drowned out by the crowd noise where we were standing. It didn't really matter though. The folks who were there were not there to hear speeches, I suspect, as much as to show their support for a cause. That they did.

Inside the Capitol, meanwhile, the chambers were dark as the Assembly and Senate cancelled their sessions for the day. There were some committee hearings being held, however.

State population growth only 1.2 percent

California's population grew by 444,000 to 37.2 million between January 2005 and January 2006, according to the Department of Finance. That's a growth rate of 1.2 percent, a bit slower than in recent years. The detail is here.

Spending the windfall (cont.)

More ideas from readers for spending or not spending the state's $4 billion-plus revenue windfall:

--Pay off the deficit bonds early. This refers to the $11 billion or so in borrowing that the voters approved in 2004 to retire the deficit Schwarzenegger inherited (they actually approved $15 billion but only about $11 billion in bonds have so far been sold).

--Give new subsidies to install solar power in apartment complexes.

--Create a disaster-response reserve to help pay for the state's next natural disaster, which California has been blessed to avoid in recent years.

--Invest in new technology that can be shown to save the state money in the long run. Ask the state auditor to identify several high-value options from which the governor could choose.

--Hire more tax auditors, to keep the revenue flowing by cracking down on individuals and businesses that evade taxes now.

--Give a tax rebate in proportion to taxes paid, as opposed to the redistribution plan I mentioned here.